The following data apply to Saunders Corporation:
Saunders Corporation currently has 1,000,000 common stocks outstanding.
It considers raising $10 million through issuing 20-year 7.5% coupon bonds – annually paid - with 10 warrants.
Each bond has a face value of $1,000.
Each warrant gives the holder the right to purchase one share of stock.
The bonds will be sold at par.
Each warrant has a strike price of $29 and 10 years until expiration.
The interest rate of 20-year annual payment bond without warrants is 13%.
Assume the total value of Saunders Corporation right before the warrants will be exercised is $88 million
If you decide to exercise your warrants at Year 10. What is the total net payoff that you will receive from each warrant?